Garland v. Illinois Dept. of Labor, Bureau of Employment Sec.

• Decision Date: 31 January 1984
• Docket Number: No. 3-83-0417,3-83-0417
• Citation: 459 N.E.2d 1125,77 Ill.Dec. 29,121 Ill.App.3d 562
• Court: United States Appellate Court of Illinois
• Parties: , 77 Ill.Dec. 29 Sandra GARLAND, Plaintiff-Appellee, v. ILLINOIS DEPARTMENT OF LABOR, BUREAU OF EMPLOYMENT SECURITY, Division of Unemployment Insurance; Director of Labor, E. Allen Bernardi; and Board of Review of the Illinois Department of Labor, Bruce W. Barnes, Chairman, Eugene E. Christy, Member, David W. Tomai, Member, Defendants-Appellants.

Page 1125

459 N.E.2d 1125

121 Ill.App.3d 562, 77 Ill.Dec. 29

Sandra GARLAND, Plaintiff-Appellee, v. ILLINOIS DEPARTMENT OF LABOR, BUREAU OF EMPLOYMENT SECURITY,

Division of Unemployment Insurance; Director of Labor, E.

Allen Bernardi; and Board of Review of the Illinois

Department of Labor, Bruce W. Barnes, Chairman, Eugene E.

Christy, Member, David W. Tomai, Member, Defendants-Appellants.

No. 3-83-0417.

Appellate Court of Illinois,

Third District.

Jan. 31, 1984.

Rosalyn B. Kaplan, Asst. Atty. Gen., Neil F. Hartigan, Atty. Gen., Chicago, for defendants-appellants.

Cynthia M. Raccuglia, Anthony C. Raccuglia & Associate, Peru, for plaintiff-appellee.

SCOTT, Justice:

This matter comes before us on administrative review of a decision by the Illinois Department of Labor, Bureau of Employment Security. The plaintiff, Sandra Garland, applied to the Department for unemployment compensation benefits. Her application was denied. On administrative review in the circuit court of Bureau County, the decision of the Department was reversed and the plaintiff's application was allowed. The Department appeals the decision of the circuit court of Bureau County for our consideration.

Prior to May 20, 1981, Sandra Garland's husband, Darwin Garland, was president of the Garland Construction Company and owned all of the stock of that corporation. Sandra served as the company's secretary. She was also on the company payroll. There were business reversals in November of 1980, and the plaintiff was laid off. She applied for unemployment benefits through the Department of Labor's Bureau of Employment Security. In May, 1981, Darwin Garland transferred all of his stock in the corporation to his wife and she became the president. The purpose of this transaction was to qualify the business as a "female minority corporation" as that term is defined under Illinois law. Sandra Garland was still not employed, and continued to maintain her claim for unemployment benefits.

In a hearing before the Bureau of Employment Security, Sandra Garland was denied unemployment benefits both for the period of time when she was corporate secretary, and later for the period of time when she was corporate president. During this time, except for the week of May 20, 1981, the plaintiff was a corporate officer in name only, and she performed no services for the corporation nor did the corporation pay her any wages. The Bureau of Employment Security denied Sandra Garland's request for unemployment compensation. The Bureau concluded that unemployment compensation is only available for those who are involuntarily unemployed, and because Garland Construction Company was at all times a closely-held family corporation, the Bureau concluded that Sandra Garland had control over her employment and thus her unemployment was voluntary, not involuntary.

As recited at the outset, the plaintiff appealed the decision of the Bureau to the circuit court. On administrative review, the circuit court disagreed with the Bureau of Unemployment Security and awarded unemployment benefits to Mrs. Garland. The Department of Labor has appealed.

According to the Unemployment Insurance Act, "an unemployed individual is eligible for benefits." (Ill.Rev.Stat.1981, ch. 48, par. 420.) An individual is "unemployed in any week with respect to which no wages are payable to him and during which he performs no services." (Ill.Rev.Stat.1981, ch. 48, par. 349.) The purpose of these benefits, and indeed the purpose of the Unemployment Insurance Act, is to benefit only those individuals whose "economic insecurity (is) due to involuntary unemployment." (Ill.Rev.Stat.1981, ch. 48, par. 300.) Yet, the legislation is to be construed liberally to benefit those intended to be assisted. Yurs v. Department of Labor (1968), 94 Ill.App.2d 96, 235 N.E.2d 871.

It is noteworthy that the Unemployment Insurance Act establishes an insurance program, and not a tax. Contributions to the program are placed in trust for those it is intended to assist. (Lindley v. Murphy (1944), 387 Ill. 506, 56 N.E.2d 832; Zehender & Factor v. Murphy (1944), 386 Ill. 258, 53 N.E.2d 944.) Thus, unlike a tax, where benefits are not necessarily payable to all those who pay the tax, benefits of the insurance program should presumably be payable to all for whom contributions must be paid. Contributions are payable by an "employer" with respect to "wages" payable for "employment." (Ill.Rev.Stat.1981, ch. 48, par. 550.) Wages include "every form of remuneration for personal services including salaries, commissions, bonuses, and the reasonable money value of all remuneration in any medium other than cash." (Ill.Rev.Stat.1981, ch. 48, par. 344.) Employment includes "all services performed by an officer of a business corporation, without regard to whether such officer is or is not a stockholder or member of the Board of Directors of the corporation." (Ill.Rev.Stat.1981, ch. 48, par. 316.) Can it be then, that this stockholder-officer for whom required contributions were paid can never benefit from the contributions made in her behalf?

The Department of Labor argues that to permit payment of benefits to the plaintiff would open the system to "manipulation" by owners of closely-held corporations with a "potential for abuse of the system." Such manipulation was apparently presaged in part by the legislature as it has exempted from the definition of employment "service performed by an individual in the employ of his son, daughter or spouse and service performed by a child under the age of 18 in the employ of his father or mother." (Ill.Rev.Stat.1981, ch. 48, par. 328.) The Department urges that we refuse "to exalt form over substance and realistically conclude that a family's attempt to observe corporate formalities does not control a decision as to eligibility of a family member...